By Reid Wilson
A state that expected perhaps the most severe budget crunch in American history instead has a more than $75 billion budget surplus, Gov. Gavin Newsom (D) said Monday, after a booming stock market and better-than-anticipated tax revenues over the pandemic-plagued year.
As recently as a year ago, California’s top elected officials were staring into a budgetary abyss that made the Great Recession look like a pothole. Newsom’s office projected a budget deficit of up to $54 billion, or about a quarter of the entire state budget. Legislators prepared to cut state government to the bone.
“We were scared, all of us,” state Assemblyman Chad Mayes (I) told The Hill last month. “We all agreed, ‘Hey, we’re going to take a hit because we’re heavily dependent on high-income earners.’”
But the stock market’s rebound, and its yearlong rally, have helped repair the gap. California is unusually reliant on receipts from capital gains tax, so a strong year in the market is good news for state government. Initial public offerings from companies like DoorDash and Airbnb helped, while sales tax revenues also came in in greater amounts than expected.
Newsom said in an address Monday that he would propose using much of the money to fund what he said would be the biggest economic recovery package in state history.
Newsom’s $100 billion proposal would add $12 billion more in direct payments to California residents, including $600 to most people and an extra $500 to families with dependents. The payments would go to families making less than $75,000 a year.
“California’s recovery is well underway, but we can’t be satisfied with simply going back to the way things were,” Newsom said in a statement. His office called the payments the largest tax rebate any state has ever given.
The package also includes what Newsom said would be a major assistance package aimed at helping renters cover 100 percent of their past-due rent.
Newsom plans to lay out the rest of his proposal in an address Friday, when he will lay out midyear budget revisions.